FORENSIC ACCOUNTING DEMYSTIFIED - Microsoft Shelley.pdf · Forensic accounting ... accounting and...
Transcript of FORENSIC ACCOUNTING DEMYSTIFIED - Microsoft Shelley.pdf · Forensic accounting ... accounting and...
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FORENSIC ACCOUNTING DEMYSTIFIED
11th National Investigations Symposium Stream B: Technology / Forensics – Forensic Auditing
Adeline Shelley Fraud & Forensic Services, RSM Australia 10 November 2016
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Types of forensic accounting engagements
What does a forensic accountant do?
Auditing and forensic investigation compared
Case studies
Key areas to be covered
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About your presenter: Adeline Shelley Senior Manager, Fraud & Forensic Services.
Joined RSM in January 2015 from a ‘Big 4’ firm, to help build the firm’s new Fraud & Forensic Services practice.
Over 15 years’ forensic experience, in Australia as well as overseas.
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Spent 10 years at the Metropolitan Police at New Scotland Yard in London as one of only two Forensic Accountants. Worked on a mixture of criminal and civil matters including fraud, drug trafficking, human trafficking, money laundering and funds/asset-tracing and the recovery of criminal proceeds.
Started career as an auditor/accountant in a mid-tier accounting firm.
Chartered Accountant (CAANZ and ICAEW Fellowship).
Certified Fraud Examiner (CFE).
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Forensic accounting
“Forensic” means suitable for use in a court of law. … is the integration of accounting, auditing and investigative skills and the ability to communicate financial information clearly and concisely in a courtroom setting. … is the analysis, interpretation, summarisation and presentation of complex financial and business issues in a manner that is understandable and supported by evidence. … encompasses both litigation support and investigative accounting.
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Forensic accounting – types of engagements
Financial crime investigations: fraud; money laundering; theft; scams; insider trading; tax evasion; bribery; embezzlement
Dispute resolution: breach of contracts; construction claims; trademark and patent infringements
Quantification of losses
Forensic contract reviews
Bankruptcy, insolvency and reorganisation
Business valuation
Matrimonial disputes
Expert witness testimony
Critique of an opposing expert’s report
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What does a forensic accountant do?
Must adhere to APES215 Forensic Accounting Services Must comply with APES 110 Code of Ethics for Professional
Accountants
Utilises an understanding of: economic theories business information financial reporting systems accounting and auditing standards and procedures data management & electronic discovery data analysis techniques evidence gathering and investigative techniques litigation processes and procedures
to perform their work 7
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What does a forensic accountant do?
Perform forensic analysis: data collection -> data preparation -> data analysis -> reporting
Examine and analyse company accounts to distinguish income streams and conduct concealed income analyses
Reconstitute accounting records and reconstruct financial statements and accounts from incomplete and corrupted financial records
Provide specialist knowledge – business processes, accounting systems, trends, industry benchmarks
Valuation – income, asset and market approaches Prepare accountancy records and reports to an evidential standard and
presenting them to the Court Analyse/evaluate/critique reports prepared by accountants acting for the
other party
… look beyond the numbers and deal with the business reality of the situation.
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Audits and different types of audit
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What is an audit? “An official inspection of an organisation’s accounts, typically by an independent
body.” [Source: Oxford Dictionary] “ A complete and careful examination of the financial records of a business or
person” or “careful check or review of something.” [source: Merriam-Webster http://www.merriam-webster.com/dictionary/audit ]
“An auditor is a watchdog, not a bloodhound. As a matter of commercial reality, audits are performed in a client-controlled environment.” [source: Bily v. Arthur Young & Co. 3 Cal. 4th 370, 399 (Cal. 1992)]
Types of audits include: Statutory audits Internal audits Forensic audits (e.g. foreign bribery & corruption audits, compliance audits,
forensic contract audits) Etc.
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Six characteristics of professional scepticism
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Professional scepticism is an attitude that includes a questioning mind, being alert to conditions which may indicate possible misstatement due to error or fraud, and a critical assessment of audit evidence.
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Auditing and forensic investigation compared Issue Financial statement auditing Forensic investigation Timing Recurring – conducted on a regular,
recurring basis Non-recurring – conducted with sufficient predication (e.g. suspicion, allegation, complaint/report)
Scope General – general examination of accounting data
Specific – to prove or disprove what is alleged by gathering the facts (evidential)
Objective Opinion – generally an expression of opinion on the financial statements or related information (whether the financial statements give a true and fair view)
Affix blame – the goal is to determine whether fraud has/is occurring, and to determine who is responsible (culpable)
Relationships Non-adversarial – the audit process is non-adversarial in nature
Adversarial – because affixing blame is adversarial in nature
Methodology Audit techniques – conducted primarily by examining accounting data
Forensic examination techniques – conducted by review of data/documents (financial & non-financial), public records, and interviews
Presumption Professional scepticism – is how auditors approach audits
Proof – fact finding (evidence) to support or refute an allegation of fraud, etc.
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Note: adapted from the Association of Certified Fraud Examiners (ACFE) Fraud Examiners Manual
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Case study – reconstitution of accounting records
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Azwar Majeed
Ex-Chairman of Crawley Town FC in Sussex
Properties in Brighton Luxury cars: 1 x Ferrari Enzo 1 x Lamborghini Murcielago 1 x Lamborghini Diablo 1 x Ferrari 355 Spider 1 x Porsche 996 Turbo 2 x Bentleys 4 x BMW M3s 3 x Range Rovers 1 x Mercedes
Police seized £505,500 in cash from a Harrods deposit box
Cheated HMRC by about £750k Failure to keep records Money laundering
3.5 years imprisonment
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Case study – concealed income analysis
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Bernard John BURVILL BEACH
Armed robberies at London Heathrow Airport
Referral from the Flying Squad
First robbery - February 2002 £4.3m in various currencies
Second robbery - May 2004 £86m cash and gold bullion
Beach – 16 years imprisonment Burvill – 10 years imprisonment
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Case study – loss quantification and restating the financial statements
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Bernard John BURVILL BEACH
Engineering / construction company Fraud committed by the internal Travel Co-ordinator $2.8m stolen over a period of 2 years Quantified loss from the fraud Matched travellers’ names against employee
listing Ascertained purpose of travel Reconstructed the accounts Traced transactions to general ledger accounts Checked against supporting documents Prior year adjustments Result Dismissal Referral to Victoria Police Recovery of funds
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Adeline Shelley Senior Manager Fraud & Forensic Services RSM Australia T 9286 8130 M 0423 313 183 E [email protected]